1205003226 Q1. What are the goals of financial management? A1. The experts in the field of finance believe that if the market value of the firm’s equity is maximized; the goal of the financial management is attained. There are two versions of the goals of the financial Management: Profit Maximization and Wealth maximization. Profit maximization: This is a goal wherein‚ the returns are maximized with the best output and price levels. A firm’s performance is evaluated in terms of profitability. The target
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the NPV and IRR for the above two projects‚ assuming a 13% required rate of return. b. Discuss the ranking conflict. c. What decision should be made regarding these two projects? Answer: a. NPV of A = $211‚305 NPV of B = $401‚592.64 IRR of A = 16.33% IRR of B = 15.99% b. The later cash flow of B causes its lower IRR even though it has the higher NPV. c. B should be accepted because it is the mutually exclusive project with the highest positive NPV. Keywords: NPV‚ IRR
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8. Year 0 Year 1 Year 2 Taxable income $9‚100 $10‚250 $15‚300 Marginal tax rate .30 .30 .30 Tax $2‚730 $3‚075 $4‚590 Revenue $13‚000 $16‚250 $23‚400 Expenses (4‚250) (8‚000) (8‚100) Tax cost (2‚730) (3‚075) (4‚590) Net cash flow $6‚020 $5‚175 $10‚710 Discount factor (6%) .943 .890 Present value $6‚020 $4‚880 $9‚532 NPV $20‚432 11. a. Year 0 Year 1 Year 2 Year 3 Year 4 Before-tax cash flow $(500‚000) $52‚500 $47‚500 $35‚500 $530‚500 Tax cost (7‚875)
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Explain the theoretical rationale for the NPV approach to investment appraisal and compare the strengths and weaknesses of the NPV approach to two other commonly used approaches. One of the key areas of long-term decision-making that firms must tackle is that of investment - the need to commit funds by purchasing land‚ buildings‚ machinery‚ etc.‚ in anticipation of being able to earn an income greater than the funds committed. In order to handle these decisions‚ firms have to make an assessment
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opportunity to extend their network. More information regarding the programme of the conference programme can be found in the Event Design Proposal. In addition to the Event Design Proposal‚ this report focuses on a method that can measure the Return on Investment (ROI) on this large-scale event. As ROI has become a pressing matter‚ especially in the event industry‚ this is offers a perfect opportunity to implement the ROI methodology. All staff members of iVents have been involved with the ROI institute
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Stryker’s 20% growth benchmark. To what extent have they been shaped by elements of corporate finance theory? They are heavily influenced by corporate finance theory All submissions are required to show the net present value (NPV)‚ internal rate of return (IRR) and payback period. They need to highlight the project’s anticipated outgoing cash flow and earnings effects on the company and describe specific risks that could affect the projects abitily to deliver projects economic results. Specifically
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(MBAZ505) The main purpose of investment is to maximize shareholders’ wealth by improving the value of the firm. Firms invest to replace existing equipment‚ for expansion‚ and for compliance with government regulations. There are three categories of investment decisions: acceptance or rejection‚ ranking of projects‚ and choosing between projects. To assess whether it is viable to invest or not the NPV technique can be used to compare the present value of returns and costs. If the NPV is negative it implies
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capital budgeting decision by using discounted cash flow analysis to make an investment and corporate policy decision. Ocean Carriers is a shipping company evaluating a proposed lease of a ship for a three-year period beginning in 2003. The proposed leasing contract offers very attractive terms‚ but no ship in Ocean Carrier’s current fleet meets the customer’s requirements. The firm must decide if future expected cash flows warrant the considerable investment in a new ship. For the questions below
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NET PRESENT‚ VALUE‚ MERGERS AND ACQUISTIONS TRIDENT UNIVERSITY INTERNATIONAL AVIE MARIE JOHNSTONE STRATEGIC CORPORATE FINANCE FIN501 MODULE 5 CASE ASSIGNMENT PROFESSOR WALTER WITHAM
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Chapter 6 | Capacity Planning | | TRUE/FALSE 1. Capacity is the maximum rate of output of a process. Answer: True Reference: Introduction Difficulty: Easy Keywords: capacity‚ maximum output rate 2. Capacity decisions should be made separate from strategic decisions. Answer: False Reference: Introduction Difficulty: Moderate Keywords: capacity decision‚ strategic decisions 3. Capacity can be expressed by output or input measures
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